AAAnderson Associates Inc. can help you remove your Private Mortgage Insurance

It's typically understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes in the event a purchaser defaults.

Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How homebuyers can avoid paying PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise home owners can get off the hook sooner than expected.

It can take countless years to get to the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.

The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At AAAnderson Associates Inc., we're masters at identifying value trends in Vancouver, Clark County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

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